On paper, the county only has about $34 million dedicated to
the total $135 million needed to fully fund post-retirement health insurance and
benefits for all current employees and retirees.

Followers of the statewide PERS controversy, in which
lawmakers took action to reign in pension costs as government employers struggled
with how to pay future pensions due to a statewide "unfunded liability" of
anticipated costs, might recoil at the county's much more poorly-funded
commitment to provide health insurance for retirees.

However, the 25 percent funding actually exceeds the county's
goal of funding 20 percent of retirement benefits by the current fiscal year.
Plus, that 25 percent could be converted into a much healthier figure if county
leaders chose to invest the funds differently, according to an actuary hired to
conduct bi-yearly valuations of the county's retirement benefits obligations,
known as Other Post-Employment Benefits.

"It really doesn't change the promises you've made to your
employees and existing retirees, it just changes the way the accounting works,
so it looks much prettier on your balance sheets," said Michael Schionning, an actuary for Cheiron, the firm the county hires to conduct the
valuations.

Schionning appeared Tuesday before the Multnomah County
Board of Commissioners to outline the county's options for funding retiree benefits.

A little background
on the fund:

Under state statute, the county must make insurance
available to retirees until age 65, when they become eligible for Medicare. The
county has bargained with its employees unions to chip in about 50 percent of
premiums, as well. With the average
county employee retiring at age 59, that leaves the county on the hook to help
pay for employees' health insurance for six years after they stop working.

Currently, the county's risk management fund includes $34
million toward the total expected cost of providing retirement benefits for all
current employees and retirees under 65. It's estimated that the county would
need $135 million to pay that cost up front. Instead, the county pays the premiums
on a yearly basis, with department leaders factoring their share of the cost
into annual payroll budgets.

Although the $34 million is meant to offset the total $135
million liability, state statute prohibits it from showing up that way on
accounting sheets because county leaders could choose to use it for other
expenses in a pinch. Statute requires that money can only count toward
the unfunded liability if it is placed in a trust dedicated solely to funding
post-retirement benefits.

By doing so, Schionning said, the county could greatly reduce
its "unfunded liability," -- a term used to describe anticipated costs that are
not backed up with cash on hand.

Placing the money in a trust would reduce the existing
liability from $135 million to $101 million. Such a trust would also likely
yield annual investment returns of 7 percent or more, allowing the county to gradually
work toward fully pre-funding employees' retirement benefits.

Schionning warned, though, that funding future retirement
costs with investments doesn't come without risk—a fact that was driven home in
2008, when PERS, the statewide fund to pay for government employees' pensions,
lost $17 billion in invested money.

"If you have another 2008 here all over again, things change and you've got to
make up that investment lost," he said.

County chief financial officer Mark Campbell said
transferring the $34 million to an irrevocable trust has benefits, but he isn't
sure whether doing so is the right move for the county.

He said the decision of whether to place the money in a
trust could come up next year, when Schionning's firm completes its next appraisal
of the county's efforts to pay for retiree benefits.

He reminded commissioners that recent legislative action to
bump the retirement age for Oregon's government employees up to 65 years old
should eventually eliminate the county's obligation to provide insurance for
retirees. By the time they retire, all employees will already qualify for
Medicare.